Are Yahoo’s patents strong enough to topple Facebook?

Yahoo's patent lawsuit against Facebook was strategically timed to pin its …

In its surprising patent infringement lawsuit against Facebook, Yahoo is taking advantage of several factors to pin its former partner into a position of weakness.

For one, Yahoo has existed longer than Facebook, giving it more time to obtain patents covering Web technologies, even if it didn't put all those patented innovations to good use itself. Second, Yahoo's lawsuit—filed Monday—was strategically timed to occur after Facebook's filing for an initial public offering, but before the IPO actually takes place. To satisfy investors, Facebook may be forced into a costly settlement rather than risk a long, legal battle that could harm the company's perceived market valuation.

Third, Facebook appears to have a tiny patent portfolio compared to Yahoo's. Facebook's patents or lack thereof have no direct impact on the merits of Yahoo's lawsuit, but a bigger and stronger patent portfolio could allow Facebook to file a countersuit against Yahoo, putting it into a position of strength in settlement negotiations.

If the lawsuit heads to a trial, Facebook can argue that Yahoo's patents are invalid, too broad, or simply aren't infringed upon by Facebook's technology. But arguing against every claim in each Yahoo patent will be a difficult task. The ten patents combined lay claim to 285 methods and technologies, and invalidating one portion of a patent doesn't necessarily invalidate the rest.

"Separate and apart from the question of the individual strength of any of these patents, there are still ten patents and a few hundred claims here," IP attorney Patrick Patras of Hinshaw & Culbertson LLP in Chicago told Ars. "It would be very difficult for an accused infringer to succeed against all of that."

Is this patent really valid? It'll cost you to find out

To see a full list of the ten patents Yahoo is asserting against Facebook, consult this previous story, in which we noted Yahoo's claim that "Facebook's entire social network model … is based on Yahoo!'s patented social networking technology."

Determining whether each patent will hold up in a court of law is something that can't be done simply by skimming the patent summaries and claims. Many of the technologies that may seem obvious now may not have been when Yahoo filed for the ten patents between 1997 and 2007.

"This is the issue with patent law, until we spend millions of dollars litigating these patents we really don't have a good sense of how strong they are, what they actually cover, whether they're valid or not valid," Penn Law Professor R. Polk Wagner told Ars. "Patents are merely hunting licenses and nothing more. They simply give you the ability to claim against somebody else and they're subject to attack on a number of grounds."

"What the Yahoo patents appear to be doing looks pretty similar to what Facebook is doing," Wagner said. "On the other hand, patents like this that have pretty broad claims often have problems in terms of the amount of prior art that can be used against them."

Poking holes in Yahoo's patent claims

Patents can be attacked based on whether they cover innovations that were obvious at the time of filing. They can also be attacked on the question of whether the technology described is eligible for patenting at all. Patras notes that patents are more likely to hold up in court if they can meet the "machine-or-transformation test," which requires use of a specialized machine or transformation of something from one physical state to another.

Patras points out one patent in particular that Yahoo will have a hard time defending in court. This is patent #7,373,599, covering a method and system for optimizing placement of advertisements on a webpage. Importantly, the advertising placement is determined in part by user requests. Patras believes Yahoo is vulnerable on this patent because instead of merely alleging direct infringement—which can be proven even if Facebook had no knowledge of the patent—Yahoo also alleges that Facebook is "inducing infringement by its users." To be found guilty of inducing its own users to infringe a patent, Facebook would have to have knowingly violated the patent. And in order drive up the amount of damages awarded to Yahoo, Yahoo would have to prove Facebook knowingly violated the patent for years.

"One would not typically go to an indirect claim like inducement if you didn't have to," Patras said.

For the other nine patents, Yahoo alleges direct infringement, which is easier to prove. For all ten patents, Yahoo only notified Facebook of the alleged violations on Feb. 27, and filed suit two weeks later. Licensing negotiations typically take at least a few months, Patras said. The short time frame between the notification and lawsuit suggests Yahoo made little serious attempt to negotiate a license, and was simply planning to sue.

While the short notification time frame is problematic for Yahoo's inducement claim, Patras said the act of making that notification and detailing it in the lawsuit helps provide a basis for Yahoo's argument that damages should be tripled in the event that it wins the case. Yahoo claims Facebook "willfully infringed" the patents. At the very least, Yahoo can argue that Facebook knew of the patent infringement allegations before the suit was filed and did not enter into a licensing agreement.

Facebook's IPO provides incentive to settle

While Patras noted that he has no inside knowledge about the case, he said the request to triple damages seems designed to add a "shock and awe" factor to the lawsuit, and cause worry for investors looking into Facebook's upcoming IPO.

"What likely will happen in the short term is Facebook will make a decision as to whether it thinks this lawsuit is having a significant impact on its forthcoming IPO," Patras said. "If it thinks it is having a significant impact then I suspect Facebook will come to a relatively quick license agreement with Yahoo to make this issue go away. If Facebook concludes it's not having a significant impact they will fight on and get to the merits of these claims down the road."

One common tactic for companies in Facebook's position is to file a countersuit, giving itself more leverage in settlement negotiations, both Patras and Wagner said. Facebook, though, apparently owns just 21 patents, compared to 1,029 for Yahoo. Yahoo built up its patent portfolio over many years, telling employees that it was a strategy for fending off patent trolls, as former Yahoo employee Andy Baio now ruefully says.

Facebook has financial ties to Microsoft, which has a large patent portfolio, and is a member of the Open Invention Network, a Linux-themed group building a defensive patent portfolio to protect its members. But ultimately, Facebook will have to bolster its own portfolio to protect itself from more lawsuits like the one it faces now.

Facebook's future—expect a much more aggressive patent strategy

In terms of building a defensive patent portfolio, "it looks like Facebook is not there yet," Wagner said. "Given Facebook's funding and valuation I'm quite sure they are attempting to rectify that problem. My guess is they're filing enormous amounts of patents on any innovations they can come up with at this point."

Patras also expects a much more aggressive Facebook to emerge from this case. "I suspect Facebook might take a page from Google's book and get themselves some more patents by acquiring patents or acquiring companies with patents," Patras said. "Even if Facebook takes a license [from Yahoo] now to eliminate this issue, I wouldn't be surprised to see them somewhere down the road come back after Yahoo for patent infringement, whether they're patents Facebook owns now or later acquires, to try to get some of that money back."

Roundup of more patent news

It's been a busy week in the world of patent wars, even without the blockbuster Yahoo/Facebook case. Here's a look at some of the other legal developments we saw in the past few days. You can also check out last week's patent wars roundup.

Samsung's attempt to ban Apple's iPhones and iPads in the Netherlands with standards-essential patents was rejected by a Dutch court. (The Verge)

A patent-holding company called Cascades Computer Innovation filed an antitrust complaint against Motorola, LG, Samsung, Dell, and HTC. (ITworld)

A trial in Oracle's patent infringement case against Google over use of Java in Android has been scheduled to begin April 16. A Google lawyer, however, is asking for a change to the trial date. (Groklaw)

Patents formerly owned by Nortel are now controlled by a consortium including Microsoft, Apple, EMC, RIM, Ericsson, and Sony. (Network World)

Apple has narrowed the scope of a patent infringement case against Samsung. (AppleInsider)

In another case, Apple accused Samsung of violating a court order requiring it to produce source code. (Bloomberg)

36 Reader Comments

There's a pretty easy solution to this, buy Yahoo for a 20% stake in Facebook. Fold "like" buttons into all Yahoo's news articles and use it to get a greater foothold into Asia, where Facebook hasn't done so well.

"I suspect Facebook might take a page from Google's book and get themselves some more patents by acquiring patents or acquiring companies with patents,"

Too bad they can't use their size and position to push for real patent reform. Instead they'll just perpetuate the oppressive disaster that are software patents and make the industry an even more hostile place for new companies and individuals.

Wrong question. Are Yahoo's patents strong enough to keep Yahoo alive? I don't think so - I certainly hope not. Patent trolls that take on the deepest pockets in silicon valley last longer than they should but they don't last and certainly don't thrive. It's a pathetic way to go for a company in the position to do interesting things.

As has been said before, I also hope that Yahoo goes far enough to do some serious damage to Facebook(or even put it under), because Facebook collapsing is the only way we're going to have enough people drawn to the problem of patent laws that something will actually be done about it.

As much as I often dislike Facebook I can't deny that it was a novel and game-changing in the beginning. For Yahoo to claim anything is just absurd, and shows just what an insanely massive legal minefield we've created for anyone who dares to try and succeed is the tech world. I don't see how it could be possible to be successful and avoid litigation in this business, and that to me just seems immoral.

Obviously companies need to have some recourse for theft of genuinely novel IP but clearly software patents, at least as they exit now, serve only to yoke the neck of industry as a whole.

It seems that Yahoo has become so desperate at to enter the world of patent trolling. Despicable. After over fifteen years I may just have to close my very first email account and discontinue all other services.

"This is the issue with patent law, until we spend millions of dollars litigating these patents we really don't have a good sense of how strong they are, what they actually cover, whether they're valid or not valid,"

This is the issue with the patent system, not just patent law. If a patent is issued, it should be much more credible than they are currently.

At least the way patents have worked in the last thirty years, the first company to implement a particular kind of software was in a position to accumulate a variety of patents related to its processes. No more innovation is required for a valid patent than being the first to actually use or to just imagine a technique for using software for a particular kind of process. Perhaps with the growing contention over software patents, case law will wind up setting the bar higher. But, if the bar is left where it has been for at least the last fifteen years, at least some of Yahoo's patents are going to stand up. The incentive for Yahoo to license the patents is the desire to make money off of them. That kind reality has been the history of the computer industry as new arrivals have emerged and profited from building on the businesses that older companies helped get going. Facebook paying patent royalties to Yahoo is certainly a case that would fit a well established pattern.

So it's not enough to execute masterfully in design, development, and the supply chain, but they must also have patents with which they can defend themselves?

Quote:

A castle without walls isn't much of a fortress.

I think the point of patents has been missed entirely. If patents are defensive walls (or in Apple's case, offensive weaponry) then why even have patents at all. Abolishing software patents eliminates a source of lawsuits and constant, unproductive expense.

So it's not enough to execute masterfully in design, development, and the supply chain, but they must also have patents with which they can defend themselves?

Quote:

A castle without walls isn't much of a fortress.

I think the point of patents has been missed entirely. If patents are defensive walls (or in Apple's case, offensive weaponry) then why even have patents at all. Abolishing software patents eliminates a source of lawsuits and constant, unproductive expense.

The fact that apple has such $$$ is part of the reason they get sued so much, and like already said, patent trolls need nothing in exchange for licensing.

Ironically, seeing how apple has dealt with Android vs. MS and Palm and RIM would suggest it is good to have a defensive portfolio.

So it's not enough to execute masterfully in design, development, and the supply chain, but they must also have patents with which they can defend themselves?

Quote:

A castle without walls isn't much of a fortress.

I think the point of patents has been missed entirely. If patents are defensive walls (or in Apple's case, offensive weaponry) then why even have patents at all. Abolishing software patents eliminates a source of lawsuits and constant, unproductive expense.

The fact that apple has such $$$ is part of the reason they get sued so much, and like already said, patent trolls need nothing in exchange for licensing.

Ironically, seeing how apple has dealt with Android vs. MS and Palm and RIM would suggest it is good to have a defensive portfolio.

You've got it backwards.Apple's patent portfolio is offensive, it's other companies who file defensive suits.That's the way their latest suits have been.

So it's not enough to execute masterfully in design, development, and the supply chain, but they must also have patents with which they can defend themselves?

Quote:

A castle without walls isn't much of a fortress.

I think the point of patents has been missed entirely. If patents are defensive walls (or in Apple's case, offensive weaponry) then why even have patents at all. Abolishing software patents eliminates a source of lawsuits and constant, unproductive expense.

The fact that apple has such $$$ is part of the reason they get sued so much, and like already said, patent trolls need nothing in exchange for licensing.

Ironically, seeing how apple has dealt with Android vs. MS and Palm and RIM would suggest it is good to have a defensive portfolio.

You've got it backwards.Apple's patent portfolio is offensive, it's other companies who file defensive suits.That's the way their latest suits have been.

Yeah like, exactly what I said. Apple can get away with suing over android because the makers have nothing to sue them back with (well HTC tried in vain). As I said, they won't sue MS or Palm either cause they have a deal in place (although the details are not known) or they know the end result is MAD.

Don't get me wrong, I got nothing against FB, but imagine the scenario:-Facebook shuts down because of the lawsuit. Instant martyrdom for the IP reform movement.

Facebook, since it started, became almost a vital part of peoples lives. Millions of people will start to question the reason why such an important part of their lives ended so abruptly. Then we will see masses demanding the politicians to do something about it.

I said I hope that this lawsuit shuts Facebook down, but only it's near the election year.

Edit: Someone please start something on Facebook to expose this situation and the IP law mess behind it.

As much as I often dislike Facebook I can't deny that it was a novel and game-changing in the beginning. For Yahoo to claim anything is just absurd, and shows just what an insanely massive legal minefield we've created for anyone who dares to try and succeed is the tech world. I don't see how it could be possible to be successful and avoid litigation in this business, and that to me just seems immoral.

Obviously companies need to have some recourse for theft of genuinely novel IP but clearly software patents, at least as they exit now, serve only to yoke the neck of industry as a whole.

It seems that Yahoo has become so desperate at to enter the world of patent trolling. Despicable. After over fifteen years I may just have to close my very first email account and discontinue all other services.

Was Yahoo not "novel and game-changing" at one time? Before there was worthwhile search, Yahoo was useful for finding things, and they must have been one of the earlier ad services. And they hosted shopping sites for a lot of third parties. It wouldn't be surprising if they were able to patent what a lot of other companies are now doing.

I think there's no point in vilifying Yahoo for this one-- it's what patent law allows and what 'responsibility to the shareholders' eventually requires of a company with no other worthwhile assets.

For example, in the last few years nokia, motorola, and samsung have all sued apple over "standards essential" GSM patents, usually after Apple refused to pay what they consider discriminatory licensing fees (and all of those lawsuits ended with the court agreeing with Apple).

I think the point of patents has been missed entirely. If patents are defensive walls (or in Apple's case, offensive weaponry) then why even have patents at all. Abolishing software patents eliminates a source of lawsuits and constant, unproductive expense.

Yahoo's patents are overreaching as most software patents are.. So if fB wants to start a response of any merit it will take its mighty boldness of extended teenage, and use it to change patents for everyone.

huggh, what are patents good for? Absolutely nothin. Since most everything that was invented was invented during the adult life time of the founder - so from about 2002 on, patents that were granted around that time, from 2003-2012 may have some validity. maybe.

but we can clear the decks of pre 2003 patents, and copyrights and move toward a 5 year maximum on patent and copyrights, because after all in the Internet age, 1 year = 10 years of old school time.

so Yahoo. Facebook. fight! and to get me behind either of them, once Yahoo wins, they simply own 51% and then turn all the patents over to the Free Software Foundation for management in perpetuity.

This of course will help make them the second most valuable company on the planet, and set the yardstick by which Microsoft, Google, and others are measured.

I don't understand. I thought that a patent infringement suit needed to be filed within 2 years of becoming aware of the infringement. Certainly, Yahoo has known about their grievences for longer than 2 years.

As much as I often dislike Facebook I can't deny that it was a novel and game-changing in the beginning. For Yahoo to claim anything is just absurd, and shows just what an insanely massive legal minefield we've created for anyone who dares to try and succeed is the tech world. I don't see how it could be possible to be successful and avoid litigation in this business, and that to me just seems immoral.

Obviously companies need to have some recourse for theft of genuinely novel IP but clearly software patents, at least as they exit now, serve only to yoke the neck of industry as a whole.

It seems that Yahoo has become so desperate at to enter the world of patent trolling. Despicable. After over fifteen years I may just have to close my very first email account and discontinue all other services.

I am surprised that someone has not patented "touching keys on a keyboard in a sequence that would form patterns that correspond to known words". or "Touching multiple keys on a keyboard in combination to utilize additional characters on the same key."

The device is patent-able (the keyboard, the touchscreen) but the implementation of the device should not be patent-able.

These patent articles turn my stomach. I lament baceFook, but I feel Yahoo! is in the wrong here.

The only defense I can see for patents is giving a creative time to make back the money that was spent in research and development before competition for pricing is enabled. If this is the popular defense of these ridiculous things... What is the popular defense of patents by the way?... then I would suggest an addendum to the patent proper that states, with receipts, how much money was put into development, and a time frame, based on potential for profiting from the intellectual property, for how long it would take to make this money back and an agreement to make public the progress in reaching this amount.

Whichever comes first: the time frame or the monetary goal reached; the patent then becomes defunct.

If the pending patent lacks either these requirements or a logical system of fulfilling these requirements, then the patent is withheld.